Question: You are an experienced machinist with a small tool shop. You have been asked to submit a bid to produce 12 special clamps for a new die that is under construction. You estimate that the material costs (metal and fasteners) for each clamp are $150.00. You also estimate that 9.03 labor hours are needed to produce the first clamp. The value of your labor is $50/hour.
From similar orders in the past, you estimate that there is a 90% learning curve for this type of work. Using this information, what is the lowest total bid you should submit if you charge a 25% markup on material and you wish to recoup your labor costs?